Reverse Mortgages and Annuities

An annuity should never be purchased using money from a reverse loan, but in the past there were times when a reverse loan borrower would unwisely do just that and sometimes these vulnerable seniors were (for lack of a less sensitive term) “robbed”.

But what has happened since then to protect seniors from this kind of scam?

In 1987 Congress passed the FHA Insurance and Uniform Lending practices and the FHA insurance bill that would insure Reverse mortgages.

The first reverse mortgage to be insured by FHA was in 1989 and they continue to oversee this program very closely as an added protection to seniors and since that time additional oversight has come from Housing & Economic Recovery Act, HUD, Ginnie Mae, the National Reverse Lenders Association and the Consumer Financial Protection Bureau.

Prior to this time, reverse loans were created and offered by other entities such as insurance companies in exchange for a portion of the equity of the borrower’s home when they passed away and at very high interest rates.

And quite often an annuity was tied to this transaction by obligating the borrower to use the funds from the reverse loan to purchase this insurance product.

Is this an acceptable suggestion for a senior to utilize in their “later” years?

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Dear Lorraine, You began the process for me, the process of breathing again. We were both working our display booths at the Ventura County buildings; mine with the County Fire Department and you represented your advisory company. As you descibed the highlights of a Reverse mortgage to me, it dawned on me that this could be the answer to my problem, ie., how could I pay for my wife's medical condition. After that lucky meeting, I checked out your company & found out it was doing business with FHA & apparently doing so without trouble. I checked out 3 other similar agencies, all with similar track records. So- I stayed with my original choice and didn't regret it for a single moment. So I thank you once again and strongly recommend your company to any other seekers of a compassionate and willing helper. Sincerely, Raymond A. O'Grady Newbury Park, CA
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